March 12, 2014

Agronomist Notes

Hello Reader

Could it be true? Daytime temperatures forecast above zero for the next ten days? Wow! As thrilling as that sounds, I hope the snow melts slowly to avoid soil erosion and flooding issues. I’ve been busy analyzing cloud based data management systems for farm record keeping and scouting. I also have a busy week planned with clients and product updates from Agrium, Bayer and Dow.

To solve the grain transportation glut in Western Canada, the Federal Government has stepped in and forced CP and CN Railways to ship a minimum of 500,000 MT of grain per week each, starting in four weeks time or fines will result in $100,000 per day. I don’t know how well CP Rail CEO Hunter Harrison will like being told what to do. I really hope Canadian farmers understand how incredible that intervention is and how well supported we are as an industry.

This week we’ll look at how to mine your own “small data” to create better solutions and improve efficiencies. Next, we’ll take a look at the shift from land ownership to land leasing and how you compete. Last, we’ll look at the influence of sunspots on wheat prices. We’ll finish with technical grain market news.

Photo: Sunrise before a warm day, near Three Hills, AB. Source: S. Larocque

Mining your own small data to generate profits

The newest buzzword in agriculture today is “Big Data” and what it means to large companies like John Deere, Monsanto, Glencore, Yara, Agrium etc. Big data is simply the collection, transfer and interpretation of data captured across many pieces of equipment, over large areas. The intention of large companies is to use this data to offer tailored products and services they know or think you’ll need. The reality is, mining your own small data has greater potential to help you make better decisions and create better solutions at home.

With each pass of an air drill, planter, sprayer and combine, monitors are capturing countless information, logged at certain intervals with a GPS tag. We’ve been collecting spatial (geotagged) information for years and have yet to use it, aside from yield maps. We can now create fuel use efficiency maps, wheel slippage maps, engine load, elevation, application maps of seed, fertilizer and chemical just to name a few. Each piece of information can be pulled out and analyzed to help look for patterns in yield variability or improved efficiency.

For example, if you could produce a wheel slippage map from seeding, it could point you to areas of soil texture change across the field. Wheel slip increases as you move across sandy soil or harder, dense clay soil. This in turn can point out the areas with the greatest potential for soil compaction caused by slippage. A remediation program can be put in place for those areas like gypsum or deep ripping. Another example is the use of fuel consumption maps. If you look at a yield map and a fuel consumption map from harvest, like the one shown here, they look very similar. If your yield maps are unstable, you’d be surprised how well a harvest fuel use efficiency map can correlate to yield maps.

On the efficiency side, you can look at productivity maps to work out tonnes of grain harvested per hour or the number of acres per hour used between seeding, sprayer or combine units. Some grain carts with load cells now weigh every kernel of grain harvested per field and with wireless data transfer, that data is recorded and sent to the cloud where grain flow and inventory is kept track of real time.

The beauty of all this data capture is that it is getting easier to retrieve and manage. Every farmer should be sitting down right now with their agronomist, precision ag consultant, input retailer and equipment dealer to help understand how to capture and store their data. From there you need to find out what data is being captured, what data is most valuable to your operation and how you can turn that data into a solution. For now, if you can figure out the first two, the last step will come eventually.

Big data is here and I think the most value will come out of farmers capturing and utilizing their own small data. You just have to partner and surround yourself with the right people. The true value from data capture will not be from the Monsanto’s, John Deere’s and Trimble’s of the world collecting vast amounts of data and providing solutions to maximize profits. It will be from our own ability to measure things we never thought possible. It’s that old cliché. You can’t manage what you don’t measure. Well, our measuring stick just got a whole lot bigger. SL

To give you an example, here is a link to the information John Deere captures from its equipment with JD Link.

Here is a short summary explaining big data capture and what needs to happen for farmers to make use of the data they collect.

Image source: Fuel use efficiency bottom vs yield map top. Steve Larocque

Future of farming is leasing not ownership

What is your farm’s value proposition?

There was a time when purchasing land was part of a farm’s growth strategy. That strategy is quickly changing as land values increase and demographics shift. Today, land is trading well above its capacity to provide a return on investment through agriculture. At the same time, we’re now seeing the first generation of children removed from the farm who now own the land assets. In addition, we now have more corporate ownership of lands, those who have no ties to the land or our country.

First, the reason land leasing makes more sense here is simple economics. Land values in my area are roughly $2,600 acre and rising. I could lease that land for $70.00 an acre or 2.7% of its value. To buy 1,000 acres of land with 25% down at 5% on a 25-year mortgage it would cost me $146.00 an acre to cash flow before I put a seed in the ground. That’s twice the value of land rent plus the capital tied up in the $520,000 down payment.

Secondly, we have started to see a shift in land ownership where parents in their 70-80’s are passing down the family farm to be managed by the children. The children may or may not know who is farming their land and may not even live near the farm they now own and manage. The tenants go from a strong relationship with the owners to none in a heartbeat and it’s a very uneasy feeling. In the case where the land is sold, we are starting to see more outside investment in farmland, so once again, the relationship starts at ground zero.

We know that leasing more land than you own is the new model, so how do you reduce the risk of losing that land with new ownership? How do you attract those owners as someone they would like to lease land to? Simple, you offer a better value proposition than your competitor. Competing on cash rent alone is a losing, short-term strategy so it’s time to find out what corporate farms and the younger generation wants from a tenant.

When you look at the mission statements of corporate or large family owned farms with international footprints, they focus on three things:

1)     Social
2)     Economic
3)     Environmental

The first pillar is a social responsibility. What are you doing to make your community better? How do you treat your employees and the people you deal with? Are you just a farm who crops land around a community or do you engage that community with your brand by sponsoring sporting events and supporting local businesses? Ask yourself this. What would your employees or people in the community say about you and your farm? The answer should tell you if you need help in this area or not.

The second pillar is economic. Do you employ the best farming techniques available today? Is your farm team engaged and pushing efficiencies and productivity higher? Can you prove it? How do you compare against the area average? If you farm like everyone else, then what sets you apart?

The third pillar is a key driver in almost every farm mission statement and that is environment. Though we don’t talk about it much in Western Canada, farmers do many things that are environmentally positive like no-till farming, less cultivation, few equipment passes, less fuel, smaller carbon footprint, etc. Take it a step further and consider harnessing a wetlands project or creating a project by leasing a site to promote wildlife or biodiversity on your farm. It may sound odd to have this in place but if your new landlord is from outside North America, they are going to ask about your environmental stewardship plan or projects.

The reality is, demographics point to a more removed type of landowner. In order to remain competitive and reduce the risk of losing land to owners who don’t know you, you have to sell your story. The future is not about who can pay the highest cash rent. It’s about landowners partnering with the right farms who tick the right boxes. I suggest we all have a sit down and plan out how that looks on your farm. SL

Here are two examples of family owned farms with global assets:

Ingleby’s Farm & Forests

Twynam Agricultural Group

Photo source: V. Larocque

Sunspot activity nearing peak

Wheat price lows may be in

Those of you who’ve been reading my newsletters for a number of years know I’ve talked about sunspot activity and its impact on wheat prices. In a nutshell, sunspot activity has been linked to global wheat prices since the 1700’s. Low sunspot activity leads to higher global cloud cover and more precipitation. The end result is less area harvested, lower quality wheat and lower global ending stocks. A brilliant synopsis on wheat prices and sunspot activity can be found here.

To give an example, if you look at the graph here, you can see that 1996-97 and 2007-08 were periods of low sunspot activity. Coincidentally, both marketing years had global wheat stock to use ratios of 19.3% and 19.55 respectively, the lowest in over 30 years. These record low ending stocks coincided with above average wheat prices. If you go back even further as the article link above shows, wheat prices do track sunspot activity fairly close. So what does this mean to us today? Well, we are now year 5 in the 11-year cycle so sunspot activity should be peaking soon and wheat prices may continue to fall or stay flat after the long sell off since last September.

2014-15 is shaping up to be the highest sunspot activity in the cycle, which means we’re a few years away from higher wheat prices. Ray Garnett from Agro Climatic Consulting in Winnipeg uses sunspots as one of many weather indicators. Garnett predicts a 2:1 probability that March to May precipitation in the Palliser North area of the Prairies will be higher than normal with moderate July temperatures forecast as well. If this is the case, higher wheat yields may be offset by lower wheat prices. Time will tell. SL

Image source: Anthony Watts, www.wattsupwiththat.com